frequently asked questions - paul e stansen apc€¦ · • a small business with not more than 500...

Frequently Asked Questions

Navigating the Paycheck Protection Program (PPP)

Copyright Paychex Inc. 2020 3

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The information presented in these materials, and that is further provided by the presenter, should not be considered legal or accounting advice, and should not substitute for legal, accounting, or other professional advice in which the facts and circumstances may warrant. We encourage you to consult legal counsel as it pertains to your own unique situation(s) and/or with any specific legal questions you may have.

APC1

Highlight

Thad IngeSr. Manager, Government Relations

Thad Inge joined Paychex in 2016 and is based in Washington,

D.C., where he serves as Senior Manager for Government

Relations. As part of his portfolio, Thad works closely with

Congress, the Executive Branch, trade associations, and public

policy organizations to monitor and advance policies of

importance to Paychex and its small business customers.


Today’s Host

Mike TraboldDirector of Compliance

Mike Trabold is the Director of Compliance Risk Management

for Paychex. In his role, Mike directs the compliance and

regulatory activities of the company, as well as manages the

company’s relationships with various federal, state, and local

regulators and tax agencies.


Today’s Speaker

Connor MykinsCompliance Analyst


Today’s Speaker

Connor Mykins is a compliance analyst at Paychex. A

Certified Anti-Money Laundering Specialist, Connor

has over 10 years of experience in the financial

services industry.

Agenda

Overview: Small Business Lending and Grants1

2

3

SBA Economic Injury Disaster Loans

The Paycheck Protection Program (PPP)

What We’re Hearing4


Q&A and Helpful Resources5


Provides low-interest federal disaster loans

for working capital to be provided to small

businesses suffering substantial economic

injury as a result of the COVID-19

(coronavirus) pandemic.

Applications now being accepted on SBA

website. More information available on

www.Paychex.com/WORX.

Small businesses with non-disaster loans

will also be eligible for relief under the

CARES Act.

Non-disaster loans include 504 loans,

microloans and 7(a) loans not made under

the Paycheck Protection Program.

Small businesses and eligible nonprofit

organizations, veterans’ organizations, and

tribal businesses described in the Small

Business Act, as well as individuals who are

self-employed or are independent

contractors, are eligible if they meet

program size standards.

Small Business Lending and Grants

Economic Injury Disaster Loans Subsidy for Certain Loan Payments Paycheck Protection Program

http://www.paychex.com/WORX

SBA Economic Injury Disaster Loans



What is an Economic Injury Disaster Loan (EIDL)?


The Small Business Administration is offering low-interest federal disaster

loans for working capital to small businesses suffering substantial economic

injury as a result of the COVID-19 pandemic. These loans:

• Are direct loans from the SBA and you apply on SBA’s website. You do not

go through a bank;

• Offer up to $2 million in assistance and may be used to pay fixed debts,

payroll, accounts payable and other bills that can’t be paid because of the

disaster’s impact;

• Are available at an interest rate of 3.75% for small businesses and at an

interest rate of 2.75% for non-profits; and

• Offer long-term repayments in order to keep payments affordable, up to a

maximum of 30 years; terms are determined on a case-by-case basis.

Currently, the SBA is also offering the option to defer payments in the first year.

Interest would accrue during this time if this option is chosen.


What changes has the CARES Act made to the EIDL program?


• Enhancements included a $10,000 cash advance/grant that can be spent on:

• Paid leave;

• Maintaining payroll;

• Increased costs due to supply chain disruption;

• Mortgage or lease payments; or

• Repaying obligations that cannot be met due to revenue losses.

If denied for the EIDL loan, the applicant does not have to repay the

advance/grant.

• For loans made before December 31, 2020, the SBA is waiving:

• Any personal guarantee on advances and loans below $200,000;

• The requirement that an applicant needs to have been in business for

the 1-year period before the disaster; and

• The “credit elsewhere” requirement.

• Loans can be made based solely on credit scores, or an alternative method,

based on the applicant’s ability to repay.


How do I apply for an EIDL?

Frequently Asked Questions• Small businesses can apply for EIDL loans directly with SBA’s Office of Disaster

Assistance.

• The EIDL application can be found here: www.covid19relief.sba.gov.

• Additional information can be found here: www.sba.gov/funding-

programs/disaster-assistance.

• Contact the SBA disaster assistance customer service center at 1-800-659-

2955 or via e-mail at [email protected] if you have additional

questions.

https://covid19relief.sba.gov/#/

https://www.sba.gov/funding-programs/disaster-assistance

mailto:[email protected]

The Paycheck Protection Program (PPP)



What is the Paycheck Protection Program?


A federal stimulus program designed to provide quick access to SBA loans

for companies with 500 or fewer employees to assist with payroll and

operating costs during short-term business disruption caused by the

COVID-19 pandemic.

PPP has a host of attractive features:

• Forgiveness of up to 8 weeks of payroll based on employee

retention and salary levels;

• No SBA fees; and

• At least six months of deferral with maximum deferrals of up to a

year.


How does the Paycheck Protection Program work?


Generally, businesses with not more than 500 employees are eligible for up to

$10 million in loans, which can be used for payroll and other expenses, such as

insurance premiums, mortgage interest, rent or utilities.

A portion of the loan (up to 8 weeks of covered costs) is eligible for forgiveness

(does not need to be repaid) if certain conditions are met.

Recipients of a loan made under the Paycheck Protection Program will be

eligible for loan forgiveness in an amount equal to the sum of the following

costs incurred, and payments made, during an 8-week period beginning on the

date of receipt of the loan from the lender:

• Payroll costs (including employee benefits);

• Interest payments on any covered mortgage obligation incurred

before Feb. 15, 2020;

• Payment of rent under a lease in force prior to Feb. 15, 2020;

• Utility payments for which service began before Feb. 15, 2020.

Any loan amounts not forgiven at the end of one year is carried forward as an

ongoing loan with terms of a max of 2 years, at a max of 1% interest.


How do I know if I am eligible for a loan under the Paycheck Protection Program?


You are eligible if you are:

• A small business with not more than 500 employees, or you qualify as a small

business of concern according to SBA definition.

• A small business that otherwise meets the SBA’s size standard.

• A 501(c)(3) with 500 or fewer employees.

• An individual who operates as a sole proprietor.

• An individual who operates as an independent contractor.

• An individual who is self-employed who regularly carries on any trade or business.

• A tribal business concern that meets the SBA size standard.

• A 501(c)(19) veterans’ organization that meets the SBA size standard.

In addition, some special rules may make you eligible:

• If you are in the accommodation and food services sector (NAICS 72), the 500-

employee rule is applied on a per physical location basis.*

* The 500-employee threshold includes all full-time employees, part-time employees, and

employees of any other status (i.e. employees currently on leave, temporary employees, day

laborers supplied by a temp agency).


Can I apply for both the PPP and for an SBA EIDL?

Frequently Asked Questions• Receiving an EIDL loan does NOT preclude you from applying for a PPP loan.

HOWEVER, you cannot use an EIDL loan for the same purpose as an PPP loan

(i.e., you cannot use both loans for the same payroll expenses).

• You may refinance an EIDL loan with a PPP loan. If you ultimately receive a

PPP loan or refinance an EIDL into a PPP loan, any advance amount received

under the Emergency Economic Injury Grant Program would be subtracted from

the amount forgiven in the PPP.

What kind of expenses does the PPP loan cover?

Eligible Expenses:

• Payroll costs.

• Costs related to continuation of group health care benefits during

periods of paid sick, medical or family leave, and insurance

premiums.

• Payments of interest on any mortgage obligation (not including

mortgage principal or interest pre-payments).

• Rent.

• Utilities.

• Interest on any other debt obligation that was incurred before the

covered period.



“Payroll Costs” means compensation paid to employees that is:

• Salary, wages, commission, or similar compensation

• Payment of cash tip or equivalent

• Payment for vacation, parental, family, medical or sick leave

• Allowance for dismissal or separation

• Payment required for the provisions of group health care benefits,

including insurance premiums

• Payment of any retirement benefits, or

• Payment of state and local tax assessed on the compensation of

employees

…but does not include:

• Compensation of any individual employee in excess of an annual salary of

$100k, prorated for the covered period

• Taxes withheld under Ch. 21,22, or 24 of IRC

• Wages paid outside of United States.

• Families First paid sick leave or family leave for COVID purposes (Note:

this is paid by government via employment tax credit)


What will lenders be looking for?


Whether the borrower was in operation before February 15, 2020 and had

employees for whom they paid salaries and payroll taxes, or paid independent

contractors.

Lenders will also ask applicants for a good faith certification that:

• The uncertainty of current economic conditions makes the loan request

necessary to support ongoing operations;

• The borrower will use the loan proceeds to retain workers and maintain payroll

or make mortgage, lease, and utility payments;

• The borrower does not have an application pending for a loan duplicative of the

purpose and amounts applied for here; and that

• The borrower has not received a loan duplicative of the purpose and amounts

applied for from Feb. 15, 2020 to Dec. 31, 2020.

Note: There is an opportunity to fold emergency loans made between Jan. 31,

2020 and the date this loan program becomes available into a new loan.

If you are an independent contractor, sole proprietor, or self-employed individual,

lenders will also be looking for certain documents (to be announced by the

government) such as payroll tax filings, Forms 1099-MISC, and income and

expenses from the sole proprietorship.


What are the loan terms?

Frequently Asked Questions• No personal guarantee or colleterial is required.

• Loans are 100% guaranteed by the government.

• No “credit elsewhere” tests (normally required for SBA).

• No borrower fees. No prepayment penalties.

• Loans are non-recourse against owners/shareholders so long as used for

authorized purposes.

• If not forgiven, loan balance is payable over 2 years at no more than 1%

interest. Initial payments are deferred for at least 6 months.


How much can I borrow?


Loans can be up to 2.5 x the borrower’s average monthly payroll costs, not to

exceed $10 million.

Payroll Costs =

Sum of Included Payroll Costs – Sum of Excluded Payroll Costs

INCLUDED:

The sum of payments of any compensation

with respect to employees that is a:

• Salary, wage, commission, or similar

compensation;

• Payment of cash tip or equivalent;

• Payment for vacation, parental, family,

medical, or sick leave;

• Allowance for dismissal or separation

• Payment required for the provisions of

group health care benefits, including

insurance premiums;

• Payment of any retirement benefit

• Payment of state or local tax assessed on

the compensation of the employee.

EXCLUDED:

• Compensation (salary, wages, tips,

commissions etc.) of an individual

employee in excess of an annual salary of

$100,000, as prorated.

• Any compensation of an employee whose

principal place of residence is outside of the

United States;

• Qualified family leave or sick leave wages

under the Families First Coronavirus

Response Act.

• Employer contributions to group health,

retirement, state and local taxes.

Note For Sole Proprietors, Independent Contractors, and Self-Employed Individuals: The sum of payments of any

compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net

earnings from self-employment, or similar compensation and that is in an amount that is not more than $100,000 in

one year, as pro-rated for the covered period.


How do I apply for the Paycheck Protection Program?

Frequently Asked Questions To apply, businesses must:

1. Be prepared to provide documentation.

2. Contact an authorized SBA lender.

3. Complete an application.


Paychex has created a report that is currently available for Paychex Flex® users, clients not on Paychex Flex, and former clients to help make applying for a

Paycheck Protection Program loan simpler.

This specialized report has the payroll cost calculations that you’ll need to be able to complete the PPP loan application found on www.treasury.gov.

To apply, you only need two numbers from this report: the Average Monthly Payroll and Number of Jobs (workers).

Note: New SBA guidance will not affect those who have already applied for loans.

How is Paychex helping its payroll clients?Frequently Asked Questions

https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Application-3-30-2020-v3.pdf

http://www.treasury.gov/


Is it true my loan will be forgiven?


A loan recipient is eligible for forgiveness of loan indebtedness for certain costs

incurred and payments made during the 8-week period immediately following the

disbursement of loan proceeds.

Costs included in forgiveness amount:

• Payroll costs.

• Interest on mortgage (in existence before 2/15/20, does not include mortgage

principal or prepaid interest).

• Rent (lease obligation existing before 2/15/20).

• Utilities (electricity, gas, water, transportation, telephone, and internet access, for

which services began before 2/15/20).

Limits:

• Not more than 25% of forgiveness may be attributable to non-payroll costs.

• Forgiveness amount cannot exceed the principal amount of the loan.

• Forgiveness amount is subject to reductions based on (1) reduction in the

number of FTEs; and/or (2) reduction in the amount of salary or wages, with an

important exception for rehires.


What are we hearing?


Questions?


Centers for Disease Control and Prevention (CDC)

• Interim guidance for businesses and employers

• Cleaning and disinfecting recommendations

World Health Organization (WHO)

• How to protect yourself

• Situation updates

Small Business Administration (SBA)

• Planning and responding to COVID-19

• Economic Injury Disaster loan program

Additional Resources

Be sure to check your local

city, county and state websites

for additional, up-to-date

guidelines surrounding

COVID-19.US Dept. of Labor (DOL)

• FLSA and wage/hour guidelines

• FFRCA Q&A

Equal Employment Opportunity Commission (EEOC)

• Hiring during the COVID-19 pandemic

Occupational Safety and Health Administration (OSHA)

• Guidance for employers on control and

prevention of COVID-19 in the workplace

https://www.cdc.gov/coronavirus/2019-ncov/community/organizations/businesses-employers.html

https://www.who.int/emergencies/diseases/novel-coronavirus-2019

https://www.sba.gov/page/guidance-businesses-employers-plan-respond-coronavirus-disease-2019-covid-19

https://www.dol.gov/whd/healthcare/flu_FLSA.htm

https://www.eeoc.gov/eeoc/newsroom/wysk/wysk_ada_rehabilitaion_act_coronavirus.cfm

https://www.osha.gov/SLTC/covid-19/controlprevention.html


Paychex.com/support/coronavirus

• Responding to COVID-19 at work

• Families First Coronavirus Response Act

• Payroll processing

• Financial assistance tools and resources

• Health insurance and workers’ compensation

Paychex’s State-by-State COVID-19 Resource Page

With information evolving rapidly about COVID-19, almost every state (and Washington, D.C.)

has developed a resource page to address the specific FAQs of its residents, as well as

unemployment insurance benefits, paid leave laws, closures, and more. Paychex has

consolidated these resources into one, simple page.

Paychex.com/WORX

Provides the latest recommendations and instructions from trusted sources that could help

protect your business and employees. Topics include:

o Business contingency planning;

o How to update handbook and workplace policies;

o Evolving federal, state, and local leave laws that cover sick leave, paid leave, and

much more.

Paychex Resources

https://www.paychex.com/support/coronavirus

https://www.paychex.com/sites/default/files/2020-03/state-coronavirus-resource-sheet.pdf

https://www.paychex.com/articles/human-resources/business-contingency-plan

{Thank You!

The information in these materials, and that provided by the presenter, should not be considered legal, accounting, or investment advice, and it should not substitute for

legal, accounting, investment, and other professional advice where the facts and circumstances warrant. It is provided for informational purposes only.

If you require legal, accounting, or investment advice, or need other professional assistance, you should always consult your attorney, accountant,

or other professional advisor to discuss your particular facts, circumstances, business, personal finance, and investment needs.

Copyright 2020, Paychex, Inc. All rights reserved.

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